How to Choose an Advertising Agency

Before beginning the search, a small company needs to think critically about what role an advertising would play into your business objectives.

IMAGE: Getty/Bloomberg/Contributor

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Long gone are the days of a handful of Madison Avenue firms controlling the advertising world. Shopping for an advertising agency is no longer done in smoke-consumed boardrooms and martini bars. With the advances of technology and the introduction of digital methods, the advertising world has changed drastically since the 1960s. Thousands of wildly different agencies exist—from 10-men experimental shops in Brooklyn to enormous traditional firms with a global reach, and everything in between. Terms like "experiential marketing" or "social media" that were relatively unknown a decade ago—much less five decades ago—are now crucial considerations. Of course, ideas are still the foundation of creative work, but other key factors play a role in forming a valuable relationship between a company and its advertising agency.

Many small businesses just out of the entrepreneurial gate rely on their own abilities and the abilities of their staff for in-house advertising and marketing needs. But for most emergent companies, a partnership with an advertising agency is an unavoidable step in the growth process.

"The likely path for entrepreneurs is to experiment to some degree with advertising," says Tom Finneran of the American Association of Advertising Agencies (4A's). "But entrepreneurs have such a full plate that they recognized that while they can do certain experiments themselves, when they start encountering significant investments, they need to have affiliations with experts. Just as that might be true for working with technology partners or manufacturing advisors, it's also true for advertising services."

Of course, simply deciding you need an advertising agency doesn't mean the search will unfold effortlessly before you. While agencies maintain the ultimate responsibility of winning your business, a large part of the search process—from understanding the best advertising options for your audience to choosing appropriate agencies for your business—falls squarely on the shoulder of the businessman. The following guide will lighten that burden and give the insight needed to find the best advertising agency for your company.

First, Ask: Is an Ad Agency Right for You?

Just two months into her job as YouSendIt's chief marketing officer, Sandra Vaughn launched an aggressive campaign to find an advertising agency for the secure file transfer service. The timing of this search is strategic based on the substantial growth the company saw in the last year and its hopes for future acceleration.

"We are on a mission to be the category leader in our space and to do that and to get there fast, advertising is a key part of what we need to invest in," Vaughn explained. "We're looking for a very strong creative firm to take us to the next level that we can scale with over the next several years."

Before beginning the search, a small company needs to think critically about what role an advertising would play into your business objectives. Whatever the reason—whether you're planning for accelerated growth like YouSendIt, redesigning your brand, or branching into new territories—it should be fully formed before you first reach out to advertising agencies.

Working with an advertising agency, especially for the first time, should not be an impulse decision. When Hilton Worldwide began a search for a new advertising agency, it planned for a rigorous preparation process. "They way people should think about this is that they're picking a strategic partner that will be an extension of their team for the next several years," says Nancy Deck, vice president of multi-brand and loyalty marketing for Hilton Worldwide.

And, agency partnerships are not the end-all, be-all. Some successful companies rely solely on in-house talent to promote their brand. Online retailer Modcloth—the fastest growing retailer and second fastest growing company on the 2010 Inc. 500 | 5000 list, creates all its advertising in-house. Before making a decision, consider the time you are willing to dedicate to this partnership, the money you're willing to invest, the skills your team already possesses and the skills your team lacks.

"Preparation is critically important," says Finneran. "If it's not done thoroughly and honestly, the search is going to end up in misfire."

Once you've addressed the tough questions about why you an agency is right for you, its time to put their answers down on paper. A request for proposal (RFP) is the most common way companies share a little bit about themselves and your advertising objectives, as well as any financial requirements or contractual stipulations that make your request unique.

When expressing your vision, try to be realistic. "The small marketer that says I need an ad in the Super Bowl with no concept of the costs or how that money may be used more prudently in other manners is not based in reality," says Finneran. "That's a problem."

The realistic scope and direction of your advertising stems from a clear understanding of your business model and your customers demographics. No one knows more about your business and your customers than you do, and it's critical that you pass that knowledge on to any potential advertising partner through your RFP.

"If a client comes in and says we've done research and know our core demographic is a 20-year-old male on social media and doesn't watch TV, we're going to be like 'Amen. Let's go digital,'" says Stephanie Peirolo, director of strategic partnerships of Wexley School for Girls, a creative agency based out of Seattle. "We try to make sure whatever decisions are being made is based on information our clients share with us about their target market."

Advertising today is a multi-faceted service with endless options, but how you advertise ultimately doesn't matter as long as it's the right advertising for your company. A RFP gives you an outlet to share your vision—whatever it may be—with prospective agencies.

Search Thoroughly, and Find the Best Agencies for You

With an RFP in hand, it's time to start the actual search. Remember that agencies come in all shapes, sizes, and colors: there are thousands of them, and they are constantly changing. Instead of plunging in blindly, enlist the help of your peers.

"Find people you trust who have been through the process recently to keep you up to date with the dynamics of the industry," Vaughn advised. "Even if you did a selection process three years ago, half those agencies are going to be very different today."

Other search methods include reaching out to local media outlets—newspapers, broadcast stations, and radio stations—to see what agencies they work with most often or using the resources of advertising agency trade associations, like the 4A's. The 4A's Agency Search is one example that allows you to narrow your search based on location, types of services, industry expertise, and other important distinctions among hundreds of agencies.

There are dozens of criteria with which narrow the agency field, but perhaps the most fundamental choices revolves around whether a small or large agency fits the needs of your company best. According to recent findings by the Horn Group and Kelton Research, two-thirds of chief marketing officers prefer agencies with 50 or fewer staff members, citing reasons such as "fewer hoops to jump through, more consistency in account teams, and more intimate partnership—regardless of budget."

For example, Wexley having a small staff of 26 means the creative directors work directly with every campaign. "When our team comes in to pitch a piece of business, our clients know that same team is going to handle their business," says Peirolo. "They also know that our owners and executive creative directors Ian [Cohen] and Cal [McAllister], touch every piece of creative that comes out of here."

As appealing and popular as boutique agencies sound, large agencies offer some persuasive counterarguments about why they're the best option for your business. For instance, Young & Rubicam's 186 global offices offer the potential to grow your business substantially—so long as you impress them. "If we didn't have faith your business would actually grow and succeed, we wouldn't pursue it," says Chris Hayes, Y&R's managing partner of global new business development. "But if we see that spark, we can take you to that next level."

While Y&R's portfolio includes heavyweights like Xerox and VH1, the firm has also helped small fish like Mississippi-based mobile company Cellular South and Payless-associated skater shoe brand Airwalk amp their national presences. And while proponents on each side of the agency spectrum maintain arguments that their sized agency is the better option, finding right fit for your agency depends on how prepared you are to meet with agencies on your short list.

Enter Into Selection Meetings Prepared

Meeting with potential agencies can be intimidating, but the experience tends to overwhelm less when companies do their homework. These meetings allow you to really see how an agency works from both a creative and a business sense, so it's important to make sure you ask any questions or express any concerns to get all the answers and assurance you need to make a final decision.

Before the creative discussion begins, certain legal technicalities such as confidentiality, idea ownership, fees, and non-compete clauses need to be addressed and negotiated. "In order for an agency to pitch intelligently they need to know a lot about what's going in your organization," says Andrew Flack, vice president of global brand marketing for Hilton Hotels & Resorts. "You need a really solid legally documented confidentiality agreement and conditions around the pitch process right from the start." Be steadfast on the legal issues most important to your company, but also keep in mind that the advertising agency is a business with important issues as well.

Once such technicalities are addressed, it's time for more creative conversations. Often, first meetings between advertisers and clients are called capabilities meetings because advertising agencies demonstrate what they are creatively capable of. While it's important to keep an open mind about everything presented to you, take all your options with a grain of salt.

"All advertising agencies can do pretty much any kind of work for any kind of client. That's what they do," says Deck. "But the truth is they shine on certain things more than others. It's really important to make sure they're really clear about what they're strongest at and why they think those particular skills are going to be right for you."

To assess the skills of certain agencies, ask for case studies demonstrating the agency's past projects. Keep in mind that case studies are not meant to exhibit their experience in your industry, but the creative team's overall style. When Ford Motors was looking for an experiential advertising agency to help promote the 2012 Ford Focus, they turned to Wexley not because they had auto experience but because, as Travis Calhoun, Ford's West Coast Marketing Development Manager says "They were the most creative."

"If Ford had just been looking for automotive experience, he would have gotten something very different," adds Peirolo. "Travis were looking for creative experience and a creative event and that's why he came to us. It's a matter of looking for experience but understanding experience in a broad enough way that you don't preclude someone that might actually have exactly what you need."

While assessing the abilities of the agency you're meeting with, also take the time to assess the people in the room. In any meetings with a prospective advertising agency, stress the importance of meeting with the actual team who will work on your campaign to determine if you have the chemistry to make this partnership work though good times and bad.

"There will come times when creative work is not on the mark and you have to give feedback, and there will be times when budgets come under pressure and you have to work through that," says Flack. "That's when you need that chemistry. They might have the best creative in the world but if these aren't our kind of people, we would seriously reconsider the option."

Like most industries in the digital world, advertising has changed drastically since the yesteryear or Mad Men. With so many options and variables, the advertising search has become increasingly complicated, but it remains an important step in the growth of many small companies.

"Advertising is an investment," says Finneran. "It's an investment in people and time and money that must be nurtured and worked at in order to be optimized. It's a progressive, positive force in industry when done correctly. And that starts with the search."